South African appliance and housewares producer Verimark Holdings pointed to increased advertising spend and additional stores as it reported a 13.7 percent revenue increase to R209.7 million for the six months ended 31 August from R184.4 million last year.
Verimark achieved positive revenue growth despite the decline of the South African economy and consumer spend.
The group said the revenue increase was mainly attributable to price decreases in March compared to the price increases in the prior year, increase in advertising spend due to the increased number of new products introduced, and additional stores made available by retail partners given the sales potential.
But profits were down in comparison to the prior year’s six months’ trading due to an increase in new products introduced which resulted in higher advertising spend.
Gross profit increased by 10.6 percent to R88.6 million, up from R80.2 million in 2016, as a result of price decreases and lower gross margins as well as increased advertising costs.
Operating costs increased by 12.1 percent to R87.7 million, up from R78.2 million in 2016, which was directly correlated to the increase in revenue.
Verimark said it expects a tougher retail trading environment for the remainder of the 2017 year as a result of lower consumer spend, which is affecting all consumer related retailers, because of the recent downgrade to “junk status” business confidence in South Africa.
No dividends were declared for the six months ended 31 August. Verimark said dividend payments will be reconsidered in accordance with the existing pay-out policy on completion of the current financial year.